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Nokia to shut down Chennai plant on November 1, as Microsoft terminates service agreement

Nokia Tuesday said that it will be suspending manufacturing of all its devices at the Chennai plant from November 1.

“Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1 November 2014. In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1st November,” Nokia said in a statement.

“Unfortunately, the continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long term viability of the established, fully functional electronics manufacturing ecosystem,” the statement said.

In September 2013, Nokia announced it would sell its devices and services (D&S) business, including assets in India, to Microsoft for $7.2 billion by March 2014.

Microsoft completed the acquisition of the mobile handset business of Nokia, leaving the Chennai plant out, at end-April this year.

According to Nokia statement, Microsoft informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from November 1, 2014.

Owing to tax disputes, Microsoft was unable to include the Nokia factory which employed close to 6,000 employees at one time.

The tax dispute resulted in the asset freeze of the Chennai plant as the income tax department last year froze the Chennai plant over Rs 21,000-crore charge over royalty payments made to its parent company in Finland. The case is being pursued by Nokia at the Supreme Court.